Poor Philip Green got it in the neck (well I suppose more specifically it was Mrs Green - perhaps i should say Lady Tina) about the thorny issue of tax evasion and tax exile in the wake of his being asked by DC to be the cost-cutting guru for the Civil Service.
Obviously this is just politics, and I don't particularly have an issue that the labour peers wanted to throw some mud around.
What makes it interesting is that Stuart Gulliver already talked about moving HSBC HQ abroad. AND today we hear there is potential EU legislation to cap banking bonuses as some sort of salary multiple.
Will this make it likely that there will be a massive exodus of banking talent from EU banks to non-EU banks?
Frankly I agree with Billy Bragg - I don't care. The bankers don't want to leave London. If they did, they would just leave! They are as mobile as anyone can be. They haven't left because they don't want to. After all South Kensington is a nicer place to live than in some Shanghai Tower. The reason they want to keep telling us how much we will miss them is they don't want to go! Billy's other point is true too. The personal spending of a few millionaire bankers isn't going to lever this country out of recession. You pay a man £9 million and he doesn't employ 10 people at £30,000 each. He buys a £5 million flat in Belgravia and lets it out to an Oil Prince. He doesn't buy ten British built Nissans. he buys a Merc S class or a Ferrari (or both).
Of course i take on board the simple maths that i would rather have their tax and spending than not. BUT i do not take on board that it is worth being held to ransom for!
Seriously if Switzerland or the U.S. really want to take on the contingent liability of a bunch of bankers with unrestrained bonuses then they are welcome. Because the price the UK paid for the last disaster will take about 200 years of banker personal spending to pay back!
Cash bonuses encourage bad behaviour. You may not throw your ethics away for a bonus of £50k. But for a bonus of £5 million?
Back when Michael Milken was jailed for insider trading a lead article in the Wall Street Journal asked why a man already being paid millions and respected throughout the world of finance would do such a thing. And an interviewee answered that question for them the next day:
"Anyone who doesn't see the motive for stealing $500 million is an idiot"
Why did Arthur Anderson allow Enron's dodgy accounting practices?
Because they didn't want to lose the fees (and the bonuses the fees generated)
Why didn't the bonus earners worry about the long-term future of A Anderson?
Because cash now is seductive - if I am a rich man I can cope with the insolvency of my employer!
If they I have been incentivised by future vesting shares of my employer I may think carefull about actions that will render the company worthless. Maybe in that light I will think more deeply about sub-prime? Maybe I will ask more questions?
I appear to have digressed... The thing is - the important point is... the UK value proposition.
A few months ago I posted a blog called the Employee Value Proposition (EVP). Anyone who has seen Dan Pink talk about the sciuentific evidence for the poor motivational mechanism provided by money will have taken on board my work on EVP. It says your company has to be providing employees a wider reason than mere cash to be working there.
Your Value proposition to customers is why they buy from you.
Your value proposition to employees is why tehy stay with you - and believe me the ones who only stay because the price is right tend not to be the ones you really want. (They are the ones buying the sub-prime debt to make that price higher)
Well call me old-fashioned, but i think there is a value proposition for living in the UK, and, having spent nearly 12 years as an ex pat I am qualified to say that.
If you don't believe the value proposition for living here. It isn't a perfect country - but it compares rather well with Hong Kong or Shanghai or Dubai. Of course that's a purely personal view.
If you, or Lady Tina Green, or the head office staff of HSBC don't want to live here then that's fine by me. And if you want to have a corprorate culture of cash reward NOW (and ergo bad behaviour NOW) I think I would rather you were the Chinese governments lender of last resort problem really.
As for poor old P Green - If he can fix the enormous problem of enormous waste in the enormous givernment he may save us slightly more than Lady Tina avoids in taxes anyway.
I happen to be in a Shanghai Tower this week, and I agree with Bozo. If you had a £5m salary you would want to live in South Kensington not Shanghai. In fact, Yorkshire would be even better than South Kensington.
I do think though, Bozo has forgotten the 50% tax that bankers pay, plus 20% VAT, plus fuel duty, plus booze duty. UK PLC probably gets 75% of the bankers mega bonuses. You can't say that for Philip Green. Let's ask for the knighthood back.
Posted by: bozo's antagonist | 12 October 2010 at 11:03